Economy: Labor Market Remains Relatively Steady in New Jersey
Labor market conditions continued to improve in New Jersey through Q3 2026, with the unemployment rate falling to 4.3% in August 2026 from 4.9% in March and total employment rising to approximately 4.7 million jobs. Despite the overall positive trend, employment performance varied across industries. Education & health services continued to expand, posting 2.9% year-over-year (YOY) growth, while information (-4.3%), construction (-2.3%), and leisure & hospitality (-1.5%) recorded the largest employment declines.
Supply & Demand: New Leasing Activity Highlights Strong Demand
Following five consecutive quarters of positive absorption totaling 1.7 million square feet (msf), the New Jersey office market gave back space in Q3 2026, posting 798,745 square feet (sf) of negative absorption. Despite this pause in occupancy gains, market conditions remained stronger YOY. Overall vacancy ended the quarter at 21.7%, down 20 basis points (bps) from Q3 2025, and new leasing activity totaled 1.9 msf, 39.3% above the trailing four-quarter average. Supply-side changes also contributed to the decline in vacancy, as 1.7 msf of office space came offline between Q3 2025 and Q3 2026 as the conversion of obsolete properties continued to affect the market.
The 21.7% headline vacancy rate was materially influenced by a limited number of large-format vacancies. When adjusted for these outliers using the Median Vacancy Rate (MVR), vacancy fell to 16.1%, reflecting healthier underlying conditions across most office properties. Another way to evaluate the availability of competitive space is to consider only availabilities that have been on the market for two years or less. Although some trophy properties take longer to reposition, this approach helps illustrate current supply constraints. Applying that filter, vacancy dropped to just 5.4%. Together, the two measures suggest that the headline vacancy rate overstates the amount of readily competitive space available in the market.
Leasing activity totaled 1.9 msf in Q3 2026, up 20.1% quarter-over-quarter (QOQ) from Q2 2026 and 53.0% from Q1 2026, extending the positive trend in new commitments across Q2 2026 and Q3 2026. Renewal activity reached 1.1 msf, up 67.1% QOQ. Demand remained concentrated in high-quality office space, with Class A properties accounting for 66.8% of total leasing volume. Notable transactions included Collectors Holdings’ 259,852-sf expansion and renewal at 210 Hudson Street in Jersey City, Fidelity’s 139,080-sf expansion at 499 Washington Boulevard in Jersey City, CACI’s 133,021-sf expansion and renewal at 15 Vreeland Road in Florham Park, and Universal Technical Institute’s 116,060-sf expansion and renewal at 1515 Broad Street in Bloomfield. Activity was broad-based, with significant leasing recorded across multiple submarkets rather than concentrated in a few key regions.
Despite negative absorption during the quarter, strengthening demand and the removal of out-of-date properties led to a YOY decline in vacancy and a healthier market. Tenants continued to favor well-maintained, highly amenitized Class A buildings, prioritizing efficiency, accessibility, and workplace experience over expansion. This ongoing flight to quality trend continues to support the performance of top-tier assets, even with vacancy still elevated across the broader market.
Pricing: Overall Asking Rents Ease QOQ in Q3 2026
Overall asking rents eased to $31.96 per square foot (psf), down 1.4% from $32.40 psf in Q2 2026 and 2.0% below the Q3 2025 average of $32.61 psf. Class A properties continued to command a premium, averaging $35.89 psf, roughly 12% above the market average and 44% above non-Class A product, which averaged $24.93 psf.
The highest Class A asking rents were concentrated in the Union Route 24 Corridor at $70.00 psf, followed by the Hudson Waterfront at $45.43 psf and the Woodbridge/Edison submarket at $41.46 psf.
Northern New Jersey
After five consecutive quarters of positive absorption totaling 2.2 msf, Northern New Jersey recorded 518,051 sf of negative absorption in Q3 2026. Despite this, overall vacancy declined 40 bps YOY to 21.4%, as the removal of 1.3 msf of inventory since Q3 2025 more than offset the decrease in occupied space.
The Hudson Waterfront drove leasing activity in Q3 2026 with 486,619 sf of new leases and an additional 214,282 sf of renewals. Central Bergen also recorded strong demand, with 210,489 sf of new leasing and 97,317 sf of renewals. By industry, financial services tenants accounted for 489,588 sf of overall leasing, followed by technology tenants at 288,675 sf.
Central New Jersey
Central New Jersey recorded 588,733 sf of new leasing activity in Q3 2026, supported by steady demand across the Woodbridge/Edison, Greater Princeton, and the I-78 Corridor submarkets. Despite healthy leasing volume, the region posted 280,694 sf of negative absorption and a modest 20-bp QOQ increase in vacancy to 22.0%.
The Woodbridge/Edison submarket remained a key source of strength, recording the region’s highest leasing volume at 180,134 sf of new leasing, representing approximately 31% of Central New Jersey’s total activity. The submarket also continued to command some of the region’s highest asking rents, averaging $36.84 psf overall and $41.46 psf for Class A assets. Metropark led demand within the submarket, capturing 86,921 sf (48.3%) of leasing activity and posting 69,493 sf of positive absorption as tenants continued to favor its highly accessible location.
